Funding a Social Enterprise

Starting a successful Social Enterprise involves a problem, a really good idea to solve said problem, and a whole lot of planning. One of the most daunting of questions involved in the process is:

Where is all the money going to come from?

Well, you have a few options each with their own pros and cons. You’ll have to decide what is best for your company.

Bootstrapping:

Bootstrapping is building the company without outside investment, using what little the founders have to put into the company, and growing with mostly revenue. There is a beauty in starting something from scratch. All the work involves you personally getting it done.

Some Pros are:

Complete control over the company

Staying true to your company

No Obligations to any outsiders

Some Cons are:

Slow start

Out of Pocket

Debt Financing:

You’re probably familiar with a loan. Most commonly for a car, student, or a home. You can also fund your business with a loan.

Some Pros are:

Same as Bootstrapping

You’ll have more cash in the bank than bootstrapping

Some Cons are:

Continuous payments with added interest

Most likely be personally guaranteed in order to be approved

It adds an additional financial responsibility, so your growing business has to be able to pay for it.

Financial Investor:

You might know how equity works and how investors play a big role in a company because of it. An investor exchanges funding for a percentage of your company’s equity, which usually gives them a say in the company decisions.

Some Pros are:

A stronger start for your company

Potential for faster growth in your business

Potentially no out-of-pocket costs

Some Cons are:

Limited control of your company

Potential misalignment of your mission and your investors

Maintaining investors happy

Requires practice pitching to multiple investors

Fundraising:

In the era of the internet, you can jumpstart your business by crowdfunding using sites like Kickstarter, GoFundme, and Indiegogo. However, using crowdfunding effectively can be difficult without a solid strategic campaign backing it up. Another option in fundraising is to simply pitch your company to potential donors. Getting in front of donors gives you the best chance at getting them to fund you. Check out our blog for Tips on Pitching to investors or donors.

Some Pros are:

Complete control over the company

Staying true to your company

Majority of the funding not out-of-pocket

Some Cons are:

Requires extensive amount of campaigning and coordinating

Requires practice pitching to multiple donors

Social enterprises have been successful in the past with these using all of these funding methods. The type of business you have, the amount of effort you are willing to put in, and how much investors might get in return will determine which one of these is right for you.